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tv   Nightly Business Report  PBS  May 30, 2012 1:00am-1:30am PDT

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>> this is n.b.r. >> tom: good evening. i'm tom hudson. susie is off tonight. research in motion warns about job cuts and losing money. what this could mean for the future of the blackberry maker. then, national home prices continue falling, but there are more signs housing may be finding its footing. and european anxieties shift to spain with that country's economy showing more signs of stress. that and more tonight on "n.b.r." new data on the housing market provided hope spring may bring some stabilization even as prices remain lower compared to last spring. as darren gersh reports from washington, there are some encouraging signs. >> reporter: at a first glance, the s&p/case-shiller home price
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numbers today are mixed, basically flat or just a tiny increase in march from the month before. but add that news with other recent reports showing strong housing starts, homes sales and rising builder sentiment, and you get a pattern. >> what you see is a pattern of increasing stability, maybe even hints of gathering strength. >> reporter: the s&p case shiller index shows prices in the top 20 cities rose 0.1% in march after rising 0.2% in february. look deeper, and the news gets better. prices fell in four cities in march but rose in 16 others. >> don't celebrate yet, but at least have some serious hopes. >> reporter: here's the hope: for the last six years, housing has been dragging down the economy, but that may finally be changing. in the first three months of this year, residential construction was one of the top drivers of growth. new construction added almost 0.4% to g.d.p. in the first quarter. >> we are going into this nice, virtuous cycle where the economy
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is helping housing, housing is helping the economy. >> reporter: while the trend may be improving, over the last 12 months, housing has certainly brought on the pain. home prices nationwide hit a new low in march, down 35% from their 2006 peak. darren gersh, "n.b.r.," washington. >> tom: still ahead: the summer travel heats up. we start a weeklong look at the vacation business with the e.o. of the company behind comfort inn and econo-lodge. "nightly business report" is brought to you by: captioning sponsored by wpbt >> tom: big news in the world of smartphones after the closing bell tonight: blackberry maker research in motion expects it will have to cut spending and
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cut jobs as it will lose money in its first quarter. the company has been under increasing pressure as it has seen its blackberry business eaten up by apple's iphone and other devices running google's android operating system. scott sutherland is an analyst at wedbush securities. wedbush snls, , and scott, is it going to get worse at research in motion? >> obviously, as i have said in research, we think as long as they go with the integrated strategy, rimm could go the way of palm. this is faster than we i want add. >> tom: meaning the handset makeer and operator system. are you advocating a split? >> i think the best way to make value is to make tough decisions like nokia did and join a system broader and more powerful. they're just a phone manufacturer with an operateding system, and an e-mail system with no other device getting traction. >> tom: speaking of devices,
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the blackberry 10 is coming out this summer. what's at stake if they continue with the current business model? >> i think the xos and the blackberry 10 is going to be a solid smart phone device, but it's more about the eco-system devices. the cloud system and management system. if you download a game or song, and share across a multitude of devices. and rimm doesn't have that eco-system. they might have a great smart phone, but not an eco-system. >> tom: does it get absorbed by somebody else creating that eco-system? >> i think being absorbed or partnering is more likely at this point in time would be the best strategy in my opinion for them to go after. it doesn't seem they're ready to change their tact. they're going to stay intgreated. >> tom: to that point, the company acknowledged in addition to the job cuts and losing money in the first quarter, it has hired a couple of investment banks to explore
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strategic options. that can mean it's for sale. do you believe it? >> you know, if it's for sale, they'd already be talking to parties, and the process would be farther along. they mentioned licensing technology and other strategic alternatives. could for sale be a more adepressive path in the future? absolutely. we're just wondering who the buyers would be at this point in time. microsoft has nokia, someone mentioned facebook and amazon. that's stretching it. >> tom: you're saying that with a glint in your eye. you have a neutral rating on shares of rimm. a lot of damage done in portfolios that have held it for many years. what makes you change your mind on rimm and say sell or buy? >> i think we've been, and continue to be closer to a sell rating or a buy rating sx.d we looked at it, and we put down the numbers and looked at the tangible book
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value and patent and other assets they have and realized there's a buffer there, but obviously, we did not expect them to generate a loss this quarter on a pro foama basis. >> due own any rimm or are you short for that matter? >> no position whatsoever. >> tom: scott sutherland with wedbush securities. thank you. >> thank you. >> tom: ahead of the research in motion news, there was a ray of optimism out of europe, but not enough to erase the worries about a weak economy and the risk of the government debt crisis cascading. the optimism came out of greece, where a weekend survey of voters found more support for a political party supporting greece's bail-out. that would commit the country to more government spending cuts. in spain, though, credit rating firm egan-jones cut the country's debt rating for the third time in a month. separately, spain's retail sales fell almost 10% last month. and here in the u.s., the conference board reported consumer confidence fell for the third month in a row, falling to its lowest level since january.
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now, this is in contrast to last week's survey by the university of michigan finding consumer confidence at its highest point since 2007. today, stocks ended the day higher. the dow is up by almost 126, the nasdaq gained about 33.5, and the s&p is up about 15. >> nigel gault is the chief economist at ihs global from me from massachusetts. nigel, we have a push and pull with consumer confidence. describe the risk of the spanish economy. compared to the u.s. economy. >> the spanish situation spirals further out of control. if you have bank failures or problems in the banking sector, the government itself is unable to deal with, because the government has a very large deficit. if people started to perceive a risk in spain, it would perhaps leave the euro zone which would be exaggerated if
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greece was to do so. the ultimate worst case is anticipation that many countries would be leaving the euro. you would see sovereign debt failures in southern europe, and you would see a cascading global financial crisis as the european banking crisis translated around the world and affect u.s. banks, of course. >> tom: are we too pessimistic about spain, or wise based upon experience from the past with greece? >> greece was the potential contagion to other parts of the euro zone, particularly across southern europe, and we've seen some contagion, so not just spain, but also about italy, which is a much larger euro zone member. it's about the contagion, and
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until people see the euro zone managed at some point to put in an effective firewall, people are going to be worried about the contagion. >> tom: we've got the election coming up in greece, the european ministers haven't made a lot of noise about spain. is spain too big to bail? >> to a point spain can be bailed out. the problem becomes if greece looks to exit the euro, and the pressure on spain becomes much more, then europe will have to go well beyond what it's already scheduleed to do, and the bailout fund towards unlimited liquidity and purchases of spanish debt by the ecb. you'd have to go much further if the firewall is to be drawn around spain. >> tom: concerns around europe. nigel gault with us, and with i.h.s. global. thank you.
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>> tom: with only two trading days left in the month, the s&p 500 is down nearly 5%, the biggest monthly loss since november of last year. it has been a tough month for stock holders; the dow jones industrial average has been up only four days in may. the last time there were so few was 1903. as erika miller reports, there have been plenty of reasons individual investors have not been confident to put their money to work on wall street. >> reporter: crowds come to wall street to take pictures every day. although they are happy to look, many are not interested in buying stocks, for a variety of reasons. >> we have three children in
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college and two about to go, and we've been in stocks. we peeled out of stocks just because we don't want to take the risk. >> i'm always nervous. i'm the worrying type. you have to worry about your investments. >> reporter: facebook's widely anticipated public offering was supposed to help restore investor confidence. instead, it had the opposite effect. >> everyone had their eyes on this i.p.o. all around the world. and the fact that it was such a disaster from so many different vantage points, that, yeah, this is yet another huge knock against individual investor sentiment. >> reporter: wall street firms have been trying to restore individual investor confidence in stocks since the financial crisis four years ago, but so far they've had little success. many investors are so worried about risk, they would rather buy bonds, even though they are yielding next to nothing. this month, like much of the year, they bailed out of u.s. stock mutual funds and exchange- traded funds. >> on the e.t.f. side, we see there was a net, negative $3.7 billion outflow.
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so that shows that retail investors have become a lot less optimistic about where they think u.s. equities will go. >> reporter: so what would it take to lure individual investors back into stocks? one possibility is a negative return in bond funds if interest rates start to rise. erika miller, "n.b.r.," new york. >> rogers is the ceo of the c.f.a. institute, the global association of charter financial analysts. with us tonight at the nasdaq. john, celebrating an anniversary with the institute. what a year and a month for individual investmentors. j.p. morgan with the debacle, and the facebook ipo. is there something structurally wrong with the u.s. stock market that investors uta to be worried about? >> not if they have a long term be perspective. >> it's interesting the markets have rebounded toward the post lehman levels and
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investor confidence is at a low crisis level. so there is a crisis of confidence going on, and the real damage that that's causing down the road is to retirees, people who are chronically underinvestmenting in appropriated long term assets. >> tom: do you think it's just a u.s. situation? is it just americans unconfident in the stock market? >> no, members in 80 countries around the world. i was in asia last week, and investors there are putting their mon nedeposits and property. and property is a fairly speculative instrument, shying away from the stock market. so real, really, for people to be focused on working with professionals for the long term. >> tom: one thing that investors point to is during the credit crisis, the j.p. morgan trade issue, and the facebook ipo, nobody proposed criminal activity in the latter two. no laws were broken. is that something that needs to be addressed?
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>> well, i what really needs to be addressed is the behavior of investment professionals in the firms themselves. and so folks, investing in the market need to find people to work with to put their interests first, and the interest of the clients ahead of other interests. and that's also a recipe for success at the firm level over the long term, building a culture of trust, working with people that you can trust. >> tom: the securitys and exchange commission is working on a proposal to expand the definition of someone acting in a fiduciary role. in other words, if i look out for your best interests as opposeed to the sales person's best interest. do you support that? >> absolutely. and we're bound by a code of ethics and place the client's interests above all others regardless of the laws and regulations. the client's interests come first. >> tom: happy anniversary to the institute, and we appreciate the idea.
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john rogers with the c.f.a. institute. >> tom: investors came back after the long memorial day weekend in a buying mood, at least for today. the s&p 500 weathered the mixed u.s. housing data, the drop in the conference board's consumer confidence, and worries building about spain, to spend the entire session in the green. the index finished up more than 1%. volume wasn't spectacular-- just 710 million shares on the big board, under 1.7 billion on the nasdaq. all ten of the major stock sectors were higher, led by the
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materials, technology and financial sectors, each up about 1.5%. now, among the leading bank stocks today, bank of america. it was the best performing dow industrial stock. b-a-c shares shot up more than 4%, but volume was lighter than usual. the buying takes bank of america to its highest stock price in almost two weeks. also moving on the dow: caterpillar, up almost 3%. striking workers at its joliet, illinois, plant vote tomorrow on a revised contract offer, but their union recommends rejecting the offer. about 780 workers at the plant have been on strike for a month. facebook is plumbing new lows tonight, less than two weeks after its much-hyped stock sale. and the price weakness around facebook is dragging down one of its big partners. facebook fell almost 10%. the company was mentioned as possibly considering buying a
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norwegian maker of internet browser software, but there was no official comment. it was one of the most actively traded nasdaq listed stocks. so was its online gaming partner, zynga, whose stock fell almost 8%. there was a $1 billion deal over the long weekend. industrial products distributor interline brands will go private for just over $1 billion, including debt. shares shot up almost 40% as shareholders stand to get $25.50 per share. it's third-biggest shareholder and the private equity arm of goldman sachs are the proposed buyers. interbrand has one month to see if it can find a better offer. in our exchange traded fund market flash, all the fund's most actively traded funds were up at least 1%. the emerging markets fund led the way, up almost 3%. and that's tonight's "market focus."
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>> tom: if you stayed home this past holiday weekend, don't despair! there's plenty of time to plan a summer vacation, and the industry is counting on it. tonight, we begin a week of special coverage on summer travel with a look at how this summer is shaping up. suzanne pratt begins our reporting. >> reporter: at this liberty travel office in manhattan, the forecast for summer travel is sunny-- so bright, in fact, the company predicts their business will up be as much as 20% over last year. it looks like more americans may be travelling this summer than they have in the last few years. that's thanks to a stronger job market, stronger dollar and lower fuel prices. and then there's also simply the fact that people are tired of the "staycation" thing.
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>> people aren't waiting for next year or the year after to take vacations. this year, they've been a lot more proactive with research and booking especially with liberty because they're not waiting for economic conditions to change. >> reporter: still, not everyone is as optimistic about this summer's travel demand. a.a.a. expects the number of people taking leisure trips this summer will increase only by 1.2% over last year. while gasoline prices have recently dropped, they're still not cheap. today, a gallon of unleaded averages $3.64-- much more in some markets-- and that's likely to affect the way families vacation. >> a lot of people are economizing, and they're doing it usually in places like entertainment-- staying at cheaper hotels, staying with friends and relatives, eating at cheaper restaurants, those sort of things. >> reporter: domestic air travel will be about the same as in 2011, but look for a record number of people to take to the international skies this summer.
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so, where is this wanderlust taking everyone? >> more exotic destinations like the asian and south american markets have definitely picked up for this summer's travel. but cruising is huge. the caribbean and mexico are great. >> reporter: there are about 100 days between now and labor day. that's a lot more time for a lot of summer fun. suzanne pratt, "n.b.r.," new york. >> tom: summer travelers may not recognize the name choice hotels. that's the company behind ten hotel brands, such as comfort inn and econo-lodge. we spoke with it's c.e.o., stephen joyce, and began by asking him about summer reservations. >> actually, it's very encouraging. we had a great first quarter, and that seems to be carrying forward. we've talked to customers and looked at industry surveys. the summer seems to be shaping up extraordniarily strong. nine out of 10 customers in the industry told us they were either going to travel the same or more than they did
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last year. that's a very encouraging cipe, and the consumers are feeling better about their jobs and better about the economy. that bodes well for a strong summer season. >> tom: and how about travel in terms of how they're expected to get there. we know airfares increased. is it that impacting how we're travel something >> yeah. 90% of our folks are saying they're driving. and so the drips are going to be about 500 miles. we've got about almost half the folks saitding they're going to do two trips. i think there's going to be a lot of miles on the road this year. >> tom: a couple of vacations then. your brand are considered value hotels of the last summer your average daily rate is about $76 per night. how are your summer prices looking this year? >> they will be very similar. there's a lot of bargains to be had. people are looking for value. if our hotels not only do you pay a reason anl rate. but you get free parking and
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free breakfast that comes with one hell of >> and people like that. they're looking for value. and there's also -- if you book carefully and book on our site, you'll see value coming. we introduced a program where if you stay two separate times we give you $50 to spend for a meal or park or gas if you >> tom: some of the higher end hoemgtss have used those loiltd plans for a long time. why get into that for this summer? >> well, we've always stressed the program. it's our most loyal customers. we've got 15 million people who use us regularly. it's a way of recognizing and rewarding them for staying with us. >> how price sensitive is the customer this year compared to summers past, do you think? >> they're very price sensitive, and they have been -- if you think about the lesson learned from the recession, i think people have stopped considering wealth as
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a permanent fixture. so what we see as enormous sensitivity of the consumer -- we represent the 99% of the folks out there-ue know, we're the mid-tier and below category with our 11 brands. so as we look at it, they're looking for real value, and we think we provide that. and as a result, what we're seing is our business is getting stronger, not just because people are traveling more, but because i think more people are looking for value. tox*ment interesting per spect oif the industry with a waffle to go for that breakfast there. stephen joyce, the ceo of hotels international. thank you. tomorrow on "n.b.r.": facebook stock has been trading on the nasdaq for a little over a week, and the lawsuits are piling up. from accusations it misled investors ahead of its initial public offering to its messy first day trading on the nasdaq, this doesn't necessarily mean that facebook will be writing a big check. we'll have a full report tomorrow.
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a proposal is moving through congress that could send nascar stars dale earnhardt, jr. and ryan newman scrambling for new sponsorships. they are sponsored by branches of the u.s. military using tax dollars to recruit new members. but a house committee has approved a ban on military sponsorships as part of the defense budget. rick horrow tonight on spending taxpayer's military money on race car advertisements. >> $80 million of defense money is earmarked this year for sports sponsorships. most of that goes toward auto racing. armed forces branches are combining to spend $26.5 million on nascar sponsorships alone. over the last five years, the national guard has spent $136 million to sponsor driver dale earnhardt, jr. on the surface, the move to end military sports sponsorships is reminiscent of a similar attempt to curb bank sports sponsorships during the tarp bailouts. the difference, however, is that while banks have proven the value of hospitality and marketing at sporting events, the military hasn't. according to one of the congressman supporting the ban,
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of the 25,000 people last year that contacted the national guard because of earnhardt's sponsorship, only 20 were qualified candidates and zero signed up. sports sponsorships represent about 8% of the national guard's annual marketing budget, but they've contributed nearly nothing to recruitment efforts. it's hard to fault the government for seeking better returns on this taxpayer investment. i'm rick horrow. >> tom: that's it from us tonight at nbr. see you onlineality nbr.com back here tomorrow night. "nightly business report" is brought to you by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org
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>> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt.
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